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Five numbers and five things for small business success
In my view there are five fundamental numbers and five fundamental "things" small business owners need focus on to achieve success, first the five "things" 1) they need to know where their business is now earnings wise relative to 2) where they feel it is capable of being 3) they need a doable, realistic plan for getting from point A to point B or from where they are now to where they prefer to be 4) they need the will, determination and commitment to realize their objective and finally 5) they must have the financial wherewithal or at least accessability to make it all happen. I use the following examples to help demonstrate regardless anyone having most of these few things, missing anyone one will prevent success from occuring. With respect to knowing where you or your business is now--I think of a person getting a phone call from someone saying "I'll give you a million dollars to help me get my car out of the mud! Wow, I'll take that challenge, where's you car? The answer, "I don't know". The moral, if you have no idea where you are it makes no sense trying to develop a plan to get somewhere you might otherwise prefer to be considering you have no starting point. The converse is also true, while you may know where you are, if you have no idea where you want to go, surely any bus, any direction, is as good as another and chances are where ever you end up it, it will most probably be some place you would rather not be! Suppose you have no real determination, lack persistence, commitment or will to succeed? The probability is high the first real obstacle you encounter you will quit or give up-the going seemingly just too tough regardless you're having all the other essential components. Say you have everything but the financial wherewithal to sustain yourself or your plans during the process of achieving your goal--sort of like wanting to win a foot race without having any feet! What's the old story about the man who prayed year after year to win the lottery. One evening he finally prays to God-"God what seems to be the problem? I've been pray faithfully year after year that I might win the lottery and nothing has happened. All of a sudden there is the thunderous voice from above "Lenny, you have to buy a ticket"! All in all pretty simple stuff but for real--if you are lacking anyone of these five things you my as well forget it. On the other hand if you have these five essentials (or are willing to seriously committing yourself to getting them) you will in fact succeed! The outcome will essentially be gauranteed! Now then from a business or earnings prespective the five numbers that most need be focused on are 1) Gross revenues 2) costs 3) gross margin 4) total operating expenses and finally 5) pre-tax profit. What is the fundamental equation? Gross revenues minus costs equal gross margin--gross margin then less total expenses equals pretax profit or the bottom line! Now then of these five numbers (that exist whether we're talking about a lemonaide stand or General Motors) it should be noticed there are only three that you have any impact in affecting-gross revenue, total costs, and expenses-the other two (gross margin and pretax profit) are mear airithmetic summations. Right? Ok now of these three numbers that you can effect there is only one thing-okay, lets call it two things you can do to increase bottom line pre-tax profit--increase revenues relative to costs and expenses or decrease cost and expenses relative to revenuse--sound pretty simple? Well, it is! the trick is of course making it all happen--successfully manageing the process and incentivising others to help you do what needs be done. Just to clean up the one thing you can do rather that the two I've used here, you must decrease costs and expenses relative to gross revenue or fundamentally improve your effectiveness as a manager! I think it's fair to say at least from any individual business owners prospective, this isn't always, if ever, easy. It is just not always easy to decide what to always do when! Unless perhaps you have a network of other similier business owners that may have had similier experiences-those they were able to work through or around and just how they did it or equally valueable what may not have worked. Please help me pull together a source for free helpful information for small business owners that may prefer not having to pay huge amounts of money for consultant fees much of which might be expected not to work anyway, please! Let's start here. Thank you Bob of R Hopkins LLC rfh12@live.com